Market Thinking

making sense of the narrative

Won’tWork

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Earlier this year I speculated whether the Uber floatation would be the proverbial straw that broke the camel’s back for the overburdened Private Equity/VC exit strategy. That turned out not to be the case, albeit the stock is down 25% or so in a matter of months. Which brings us to WeWork, where the biggest investor in Uber, SoftBank, has a stake of around $10bn, including, and this is the important bit for me, a $2bn stake bought at the latest private funding round earlier this year as a (frankly ridiculous) valuation of $47bn. Leaving aside the rightly derided metrics such as “Community adjusted EBITDA’, which is basically income before almost any of their expenses, the real problem is less in the fact that this is basically just an office services company – albeit one seeking to elevate the world’s consciousness (or something) and more the fact that it threatens to let daylight in upon the magic of the Silicon Valley money machine magic.

Anyone who has seen the comedy show Silicon Valley, which at times seems like a documentary, albeit one of a world gone slightly mad, knows that the key is to keep the ‘valuation’ rising for each round, so the fact that (rightly) sceptical investors are talking about a valuation closer to $15-20bn would go a long way to breaking the spell. Softbank which is looking to raise another version of its Vision Fund, is said to be keen for the WeWork IPO to be postponed. It’ easy to see why.

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